Why you must thank John Bogle
Dhirendra Kumar | TNN | Updated: Jan 28, 2019, 16:50 ISTHighlights
- Bogle retired as a mutual fund manager a long time ago. However, the impact of his actions has been lasting, says Dhirendra Kumar
John Bogle passed away on January 16, at the age of 89. (File photo)NEW DELHI: There are some individuals who leave such a deep mark on an entire industry that they shape everything that follows. In the mutual fund industry there was such a figure. His name was John Bogle and he died on January 16, at the age of 89. You may ask how an old man who retired almost 20 years ago could have affected the amount of money that you made on your investments? The answer is costs—the amount of money that mutual funds charge you.
Bogle’s impact on mutual funds were in two areas. One, that lower costs were central to the returns that investors make and two, the widespread realisation that most fund managers could not sustainably beat the market indexes.
As Bogle famously said, “In investing, you get what you don’t pay for.” After a quarter of a century of working in a mutual fund, Bogle started Vanguard in 1976. It was the first mutual fund in the world to make available low-cost index investing to individuals. As the largest mutual fund company in the world it now manages $5 trillion. That’s about ₹355 lakh crore. To put it in perspective, this is almost 12 times the Indian government’s annual budget and even somewhat larger than the US government budget!
There’s one more remarkable side to Bogle, he founded Vanguard as not a normal business owned by him and his family, but as a non-profit! In an unusual structure, the company is owned by the mutual funds it runs, which in turn are owned by the investors who have put money into them. In Indian terminology, it’s essentially a co-operative.
All those investors are richer but Bogle was not. At the time of his death, he was worth less than $100 million, which is a tiny fraction of what others who have founded far smaller and less impactful businesses have earned. And yet, the final judgement on him is the position that Vanguard as well as his ideas hold in the financial world today.
His life, and his contribution to the bank accounts of millions of investors is a standing reprimand to the way money-related businesses generally conduct themselves everywhere.
(The author is the founder and CEO of Value Research)
Bogle’s impact on mutual funds were in two areas. One, that lower costs were central to the returns that investors make and two, the widespread realisation that most fund managers could not sustainably beat the market indexes.
As Bogle famously said, “In investing, you get what you don’t pay for.” After a quarter of a century of working in a mutual fund, Bogle started Vanguard in 1976. It was the first mutual fund in the world to make available low-cost index investing to individuals. As the largest mutual fund company in the world it now manages $5 trillion. That’s about ₹355 lakh crore. To put it in perspective, this is almost 12 times the Indian government’s annual budget and even somewhat larger than the US government budget!
There’s one more remarkable side to Bogle, he founded Vanguard as not a normal business owned by him and his family, but as a non-profit! In an unusual structure, the company is owned by the mutual funds it runs, which in turn are owned by the investors who have put money into them. In Indian terminology, it’s essentially a co-operative.
All those investors are richer but Bogle was not. At the time of his death, he was worth less than $100 million, which is a tiny fraction of what others who have founded far smaller and less impactful businesses have earned. And yet, the final judgement on him is the position that Vanguard as well as his ideas hold in the financial world today.
His life, and his contribution to the bank accounts of millions of investors is a standing reprimand to the way money-related businesses generally conduct themselves everywhere.
(The author is the founder and CEO of Value Research)
Download The Times of India News App for Latest Business News.
All Comments ()+^ Back to Top
Refrain from posting comments that are obscene, defamatory or inflammatory, and do not indulge in personal attacks, name calling or inciting hatred against any community. Help us delete comments that do not follow these guidelines by marking them offensive. Let's work together to keep the conversation civil.
HIDE